Litigation itch puts watchdog in deficit

Graeme Samuel says cost considerations won't cause the ACCC to back down in its pursuit of anti-competitive behaviour.
Picture: Andrew Quilty

Long-running and complicated legal action is eating into the budget of the nation's competition watchdog as companies mount protracted appeals and the costs of court action rise.

Appearing before the House of Representatives Economics Committee at a hearing in Melbourne yesterday, the chief executive of the Australian Competition and Consumer Commission, Brian Cassidy, said the ACCC was set to run up another operating deficit this year.

The ACCC has been forced to approach Health Minister Tony Abbott, seeking unspecified funds to bankroll what Mr Cassidy said was likely to be a "very long, complex investigation" into alleged misleading and deceptive advertising by tobacco companies.

This financial year, the ACCC is set for an $8 million-plus operating loss when a $2.5 million payout to power company AGL is factored into calculations; that follows on from its 2002-03 deficit of $10.2 million.

Funds set aside to meet costs for companies that win a case brought by the ACCC were massively depleted after a $6 million payout to Boral; the fund started the year at $7 million.

"We do see our funding issue at the moment as being basically an issue of the litigation costs that we're incurring," Mr Cassidy said. "If we are unable to have an increase in our funding, then we've said previously we'd need to look at what we call our discretionary areas of activity."

That includes enforcement action, where the costs can be measured against the "potential beneficial outcome".

But Mr Cassidy and the chairman of the ACCC, Graeme Samuel, said that did not mean the competition watchdog would resile from prosecuting companies suspected of anti-competitive behaviour.

"We would without hesitation litigate if we think that that is the means of bringing about proper behaviour and correcting misbehaviour," Mr Samuel said, adding that the ACCC was efficient and a "tight ship".

"I think we've managed to satisfy ourselves and others that the primary cause of our deficit problems are associated with the litigation issue, and the litigation is becoming increasingly more expensive.

"We've been taken to higher courts of the land by bigger business, who have been more willing over more recent years to take us on in relation to matters."

Mr Cassidy said that after the recent finding against the ACCC in the Boral case, four similar investigations had ceased - but not because of a lack of funding.

The case against Boral centres on misuse of market power - particularly by big companies over small - which is outlined in section 46 of the Trade Practices Act.

The ACCC has been pushing for a review of the section, arguing that the court has failed to take into account the spirit, as opposed to the letter, of the law.